Different is good, right? Well, if you are an employer, that statement can certainly be true. After all, few businesses are static entities, made up of a bunch of people performing the same task within the same timeframe with the same tools. In fact, many businesses have a myriad of roles, and also needs, to keep the business going. Flexibility and fluidity are key. Therefore, it can be to a company’s benefit to have different types of employees working for the company.
In case you are only familiar with a couple types of employees, here is a rundown of the different types of employees a company can have. Perhaps this will inspire you to be a little different as you are considering the future of your company.
The first group of workers we’ll discuss are W-2 employees. As the name suggests, these employees receive a W-2 at the beginning of each calendar year to show the cumulative amount of taxes withheld from their paychecks over the course of the previous year. Here are the different types of W-2 employees, and how you can differentiate among them.
A typical full-time employee works 40 hours per week normally, and may be eligible for fringe benefits. Companies may pay their full-time employees a salary or on an hourly basis.
A part-time employee can really work any number of hours under 40 hours per week. Part-time employees do not have a specific number of hours qualifying them as such, unless their employer determines a number. They are typically paid on an hourly basis.
Temporary employees, also commonly known by the abbreviation “temp workers” or “contract workers,” work on a temporary basis for a company. The length of time they work is typically preset, and may be based on a special project the company. Although it is common for companies to hire temp workers through a staffing agency, companies can also hire them directly on their own.
Seasonal employees work as a company needs extra workers for a season, which typically coincides with the company’s peak season. Summer months and holidays are common times employers will hire seasonal employees. Even though seasonal workers are not permanent employees of a company, their earnings still count toward future Social Security benefits, and may qualify for unemployment benefits.
Leased employees are a little different than the aforementioned types of employees. While other employees are paid through the company, the employment agency is the one who pays leased employees. So, technically, leased employees work for a company that hires them, but they are actually employees of the employment agency.
Note: As an aside, employers of W-2 employees may process payroll weekly, bi-weekly, semi-monthly, or monthly. However, they tend to stick to one frequency in which they process payrolls. In many cases, the distinguishing factor between full-time and part-time employees is whether the employee receives health care coverage. The Fair Labor Standards Act (FLSA) requires employers with 50+ employees to cover their full-time employees and their dependents.
The second group of workers we’ll discuss are contingent workers. Many of us know these workers as “contractors” or “1099s,” and they are the workers who perform jobs that have been outsourced by the company. These workers are not salaried—they choose when and how they will perform a task for the company, and then the company may pay them upon completion of the task, or based on a predetermined agreement. Furthermore, they receive a 1099 at the beginning of each calendar year, and must pay their own taxes quarterly and do the filing. Here are the different types of 1099s, and how you can differentiate among them.
Although the name of this type of worker may sound similar to the aforementioned contract workers (see temporary employee), they are very different. Independent contractors are just that—independent of the company they are working for. These workers also commonly called “freelancers,” “contractors,” or “subs,” which is short for “subcontractors.”
Interns are workers who are brought on by a company, often in exchange for the worker receiving experience in that company’s industry. A company may choose to hire interns with or without pay. You will often find high schools or colleges participating in internship programs, so interns are often fairly young. Internships will usually last for only a few months, but they can transition into a permanent placement by the company, in which case the intern would become a W-2 employee.
Consultants are specialists in their field, and are hired to provide professional advice or direction to a company. A consultant’s work with a company may be temporary, but can often be recurring, based on the company’s need.
Note: As an aside, contingent workers are not typically eligible for fringe benefits through the company. Therefore, if they want something like health insurance coverage or a retirement plan, they must initiate that on their own.
Why Hire Different Types of Employees
Although it may be tempting to keep things simple and stick with hiring only one type of worker, there are reasons to hire different types of employees.
Specifically, the essence of the job may determine that you must hire different types of employees. So, if you are telling the worker when to arrive, how to perform the task, and providing the tools to do the job, you may not pay that employee as a contingent worker because that person fits the description of a W-2 employee.
Also, you may not need the same number of workers, or employees working the same number of hours each week, based on market demands. Therefore, your workforce may require the need for a combination of full-time and part-time workers.
Furthermore, you may want to give other entities within the community an opportunity to partner with you. Internship programs provide just that.
Finally, what happens if you need a little business advice? Well, that’s where you will turn to consultants for their assistance.
Be Different with Your Types of Employees
So, as you can see, you have options when it comes to the workers and their roles in your company. In other words, you don’t have to hire all W-2 employees—you can mix in some 1099s. However, the most important thing to remember is that the workers you have in your company must be assigned based on the essence of the job. Specifically, be careful not to hire contingent workers when they should be W-2 employees. Then, if you get your hiring right, different really is good.